13th November 2015

BBA Brief – 13 November 2015

BBA launches report on UK competitiveness in wholesale banking

There is widespread coverage of the BBA’s “Winning the Global Race” report on the international competitiveness of the UK as a wholesale banking centre, which was led by ex FSA boss, Sir Hector Sants, now Vice Chair of Oliver Wyman. City AM (p3) quotes BBA CEO Anthony Browne saying “We have now reached a watershed moment in Britain’s competitiveness as an international banking centre. The balance of push and pull factors, including tax and capital treatment, unilateral and extraterritorial regulation and overall uncertainty, are weighing heavily in boardrooms across the industry.” You can also listen to Anthony’s interview in the business section of BBC Radio 4’s Today programme here.

The Daily Mail (p77) explains that the report cites ‘worrying trends’ including an eight per cent drop in employment in the banking sector since 2011, while UK banking assets have fallen 12 per cent despite rising in Hong Kong and Singapore. The FT (£, p4) focuses on the report’s recommendations to increase competitiveness, including calls for the creation of a new independent body responsible for penalty and redress decision making, and a multi-bank regulatory reporting utility to help meet different demands. The Telegraph (B1) quotes the report saying “uncertainty arising from the rapidly changing tax regime and EU referendum are inhibiting business planning and discouraging investment”.

Bank of England’s Chief Economist comments on regulation and interest rates

The Bank of England’s Chief Economist, Andy Haldane, says regulators and bankers still have a long way to go before the financial system is fully reformed. Mr Haldane told Radio 5 Live Wake up to Money “There has been a vast raft of regulatory initiatives over the course of the past few years, which is a reflection of just how vast the failings were during the course of the crisis. We have seen changes of culture, people have learned their lessons to some degree. Do we think as regulators, as bankers, that the system is now as good as it can be? I think that would be extraordinary, actually, if after all this change we thought we’d landed in a perfect spot.”

Separately the BBC also reports that in a speech to the TUC last night, Mr Haldane warned that the UK’s “economic aircraft appears to be losing speed on the runway”. Mr Haldane indicated that the next rate move could equally be a cut rather than a rise and cautioned that a rate rise would “increase unnecessarily the chances of the economy falling below critical velocity”.

European Banking Authority updates on use of allowances under remuneration rules

There is widespread coverage of yesterday’s publication by the European Banking Authority (EBA) of a follow-up report on the use of role-based allowances in remuneration packages. The report found attempts to circumvent the EU ‘bonus cap’, which limits variable pay to 100% of fixed pay or 200% with shareholder approval, by passing off extra awards and shares as fixed pay (Times, £, p50). The EBA and the Prudential Regulation Authority reached an agreement that such lump-sum allowances were bonuses and so should count towards the EU cap but that fixed, role-based allowances not related to risk-trading can still be paid

The FT (£, p4) reports a BBA spokesperson as saying “The British banking industry has made great strides in recent years to reform the way in which highly paid staff are remunerated. This has included deferring bonuses, paying more in shares and being able to claw back bonuses if it subsequently emerges that they were not deserved…any move which increases fixed costs and reduces the ability to use these tools seems counterintuitive”.

Today’s diary

Indian Prime Minister Narendra Modi day two of UK state visit

City of London: New Lord Mayor takes office

EU, France and Germany Q3 growth figures

Lord Hill concludes Hong Kong visit

Latest from the BBA

Chief Executive Anthony Browne writes on “Winning the Global Race”, the BBA’s new report that quantifies the threat to the UK’s competitiveness as an international centre for wholesale banking, and sets out the course of action required from industry, regulators and government to meet that threat.

SMR Responsibility Mapping Workshop, 17 November. Under the new accountability regime, the regulator requires each bank to maintain and update a document that describes each bank’s management and governance arrangements. This workshop shows you how to understand, apportion and map your responsibilities. To register your place, click here.

Latest from our Sponsor – Jaywing

Ben O’Brien, Risk Practice Director at Jaywing, writes about the annual cyclical stress test by the Bank of England.

Stat of the Day

12% – the reduction in assets in the UK banking sector since 2011, according to BBA report ‘Winning the Global Race’.

In brief

Indian Prime Minister, Narenda Modi, said he wanted to “increasingly raise funding in the London market” as he and Prime Minister David Cameron seek to agree up to £9 billion of deals during Mr Modi’s state visit (FT, £, p2). Mr Modi also commented that the UK is India’s “entry point into the European Union” (City AM, p3).

Mario Draghi, President of the European Central Bank (ECB), has hinted that the ECB will consider the case for more monetary easing in December as core inflation is taking longer than expected to return to target levels (FT, £, p10).

The number of unemployed chasing each job in the US has fallen to its lowest level in eight years as continuing strength in the labour market increases the likelihood of a rate rise (Times, £, p51).

The Guardian (p2) reports that EU leaders are close to completing a €3 billion deal with Turkey to stop the influx of migrants into the EU from the Turkish border.

The price of gold hit a five-year low yesterday, which stimulated investment of $10 billion into bars and coins, as US traders ready themselves for an interest rate rise and German and Austrian investors seek safety over concerns about the Greek economy (Times, £, p54).

The 500-page report into the failure of HBOS, originally expected in 2013, will be published at noon next Thursday (Telegraph, B1).

The BBC reports the sale of £13 billion of former Northern Rock mortgages by the Governments to a US investment firm.

The cost of hedging against price swings in the pound’s euro exchange rate reached the highest level since May 2012 as investors cite uncertainty over the EU referendum (Times, £, p58 – print only).

Hedge funds have been forced to design new training programmes because they can no longer rely on attracting experienced investment bankers due to a regulatory clamp down on proprietary trading (FT, £, p1).

Greece staged a 24-hour general strike yesterday as bailout monitors from the European Commission, International Monetary Fund and European Central Bank visited Athens to discuss progress of agreed reforms before they release a delayed €2 billion payment (FT, p10).

Donald Tusk, President of the European Council, has warned that Britain’s renegotiation may fail as Prime Minister David Cameron has embarked on a “very, very tough game” (Telegraph, p27).

What the commentators say

US President Barack Obama writes in the FT (£, p15) on the next challenge facing the G20, that of slow growth in the global economy.

Timothy Garton Ash, Professor of European Studies at Oxford University, writes in the Guardian (p37) that it is no time for petty-mindedness as Europe is in crisis.

Philip Stephens writes in the FT (£, p15) on the fatal flaw in the case for Brexit.

Jeremy Warner writes in the Telegraph (p31) that European Union membership has very little to do with the UK’s lack of world trade.

Richard Holmes, Standard Chartered’s Europe CEO, writes in City AM (p24) that a “new glorious chapter” is beginning in UK-India relations.

If you have five minutes…

The FT’s big read (£, p12) discusses the COP 21 Summit on tackling climate change taking place in Paris next month.

Latest from our Sponsor – Jaywing

Ben O’Brien, Risk Practice Director at Jaywing, writes about the annual cyclical stress test by the Bank of England.

Latest from our Sponsor – Jaywing

Ben O’Brien, Risk Practice Director at Jaywing, writes about the annual cyclical stress test by the Bank of England.

Latest from our Sponsor – Jaywing

Ben O’Brien, Risk Practice Director at Jaywing, writes about the annual cyclical stress test by the Bank of England.

Ben O’Brien, Risk Practice Director at Jaywing, writes about the annual cyclical stress test by the Bank of England.

Please register or login to add this to your interests.